THE last decade, if I had to name it, would be called “The Broken Years”. Since the 2007 crash we have been living in a social/political/economic downward spiral. The policies of the political elite have proven impotent in the face of a terminal economic system. Austerity is nothing more than the economic equivalent of a 19th-century doctor bleeding a patient because he has too much blood. The dogmatic adherence to the neoclassical economic approach is more like a religious act of faith than a scientific approach to creating economic outcomes to benefit society.

Reviewing the last year is pointless unless 2017 is seen in the context of wider global economic changes. The last decade has been the most turbulent in modern peacetime and things will get a lot worse before they get better. I want to believe that 2018 can mark the turning point, and usher in a new economic zeitgeist as the green shoots of progress are emerging. However, Trump’s refusal to accept climate damage as man-made, the isolationist, xenophobic Brexit mentality, poor economic and social progress and unsustainable personal debt levels are just some of the negative forces threatening to extend The Broken Years.

In 2006, when I debated with a member of the Bank of England’s Monetary Policy Committee I highlighted the dangers of unsecured personal debt and easy finance – he responded “we have never had it so good”. Months later investment bank BNP Paribas announced it couldn’t value the assets in its investment funds due to the “complete and sudden evaporation of market liquidity”. In other words, they had dodgy investments and no other bank was willing to lend to them because they were all in the same sinking boat. In the two previous years, US interest rates had risen from one per cent to 5.35 per cent and millions of people who had self-certified their own mortgages and over-borrowed started to default. US lenders had been combining hundreds of US sub-prime mortgages into purchasable asset bundles and reclassifying them as prime and selling them on, thus risk-infecting the entire western banking system.

The banks collapsed and only the single largest government intervention (bank bailout) in history stopped the breakdown of the economic system, thus proving laissez-faire economics (deregulation and small government) had failed completely. But then the political elites all agreed to pretend that their economic dream hadn’t died. Like that character in zombie movies that keeps his dead wife locked up in the hope that someone will come up with a cure, he still loves her, even though she keeps trying to eat him.

The impact of The Broken Years:

  • Slow economic growth has depressed wages and today people are around £4000 worse off than they would have been if the economy had continued to grow at its pre 2008-09 recession rates.
  • Unlike other cyclical recessions the UK has failed to get back to pre-recession trend GDP per capita rates through rapid growth post-crash.
  • Growth forecasts have been radically lowered and inflation is rising so be prepared to be even worse off.
  • The emergency measures included quantitative easing, often referred to as the government printing money, but it was issued as bonds which simply raised asset prices, meaning the rich got richer and the new money didn’t reach ordinary people or the small business community where it was needed.
  • Inequality is increasing – in the UK the richest one per cent now owns 20 times more than the UK’s poorest 20 per cent.
  • The policy of austerity was based on a spreadsheet error by two leading economists which, when corrected, proved such cuts were not necessary. The politicians who backed it were too embarrassed to admit they were wrong, and the impact of government spending in creating jobs and growth diminished.
  • Consumer spending continues to make up some 75 per cent of GDP and, if subdued wages lead people to stop spending, the economy will tank. To keep people spending, interest rates have been kept low and suicidal levels of personal debt have been built up. Interest rates will rise in response to Brexit-led inflation and, just as US householders started to default in 2007, UK borrowers will too.

Socially, the impact has been similarly dangerous. Cuts to services, mixed with the widening wealth gap, have created a feeling of loss of control in society. The political elites who occupy the political centre have failed and so people look to extremes for answers. The right want a bonfire of tax regulations and the left want to raise taxes and wages, both dogmatic acts of faith in outdated policies that won’t work amid the unprecedented movement of the economic tectonic plates. The dominance of mantras and group-think means it’s fine to lie in elections, so long as voters share the liar’s faith. The mainstream press reflects the demise of the quality of debate and many are now nothing more than political leafleters.

We need a new operating system for a new economy that offers a different set of values including measuring more wide-ranging indexes than just growth. Robotics, AI, biotechnology, communications advances, social media, environmental change and widening inequality are changing the nature of work, of consumption and even the laws of economics, challenging the morality of growth at any cost.

Last year I predicted that 2017 would be the year that many of the poster-boy policies of the new economic movement would gain traction. National investment banks, sovereign money and land reform have definitely come to the fore, with basic income even making the breakthrough into public awareness. The coming year will be a troubled, uncertain time, but it will also be the year that the new economics movement will start to come together to design holistic economic systems to challenge the failed neoclassical and socialist dogmas.

Pluralistic approaches that include wellbeing, health, happiness, research and development, personal growth, economic inclusion and sustainability on a par with GDP as economic measures of success will start to turn the tide towards a more positive, sustainable and inclusive economic future. Maybe, just maybe, the end of The Broken Years is in sight.